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Traders Mulling Supportive Weather, Lean Storage Stats; November Called A Nickel Higher

November natural gas is set to open 5 cents higher Wednesday morning at $2.94 as forecasters expect a round of warm, moist weather to hit important Mid-Atlantic markets. Overnight oil markets eased.

"The short range one- to five-day shifts warmer for the Midwest to Northeast with near flat changes for the South and West," said Matt Rogers, president of Commodity Weather Group in its morning report to clients. "While the East Coast peak warmth for high temperatures hits tomorrow into the weekend, the muggiest weather is actually more toward Sunday and Monday as a slug of tropical moisture advances up through the East (very warm low temperatures near 70 Monday morning for the Middle Atlantic).

"We made warmer changes to the Midwest, East, and South in the six- to 10-day with some cooler interior West adjustments. Those changes added some cooling demand to the forecast, while slightly cooler changes to the upper Midwest and East Coast in the 11-15 day added some very modest heating degree days as well."

It may take a lot more than tweaks to weather forecasts to change the operating climate for drillers and producers.

North American explorers need natural gas prices of "at least" $3.00/Mcf and a crude oil price above $50/bbl to achieve a meaningful return on capital, based on a review of more than three dozen operators by Moody's Investors Service.

Exploration and production (E&P) companies have improved cost structures substantially since the commodity price collapse in 2014. However, a review of the expected performance of 37 operators using different commodity price scenarios determined that overall, higher sustained prices are needed.

Early assessments of Thursday's storage report show unseasonably hot weather made deep inroads to expected gas storage injections. The Desk in its Early View storage survey reported an average 55 Bcf for this coming week's storage report. The range on the survey was from 46 to 66 Bcf and there were 10 respondents.

Last year 76 Bcf was injected and the five-year average stands at 91 Bcf

In overnight Globex trading November crude oil fell 13 cents to $50.29/bbl and November RBOB gasoline fell fractionally to $1.5609/gal.

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